Fundstrat’s Tom Lee is out with his latest report on cryptos, and after poring over it, we’ve pulled and highlighted some of its key points.

Fundstrat’s Tom Lee has released his latest report on cryptocurrencies and it is chalked full of nuggets about how the top cryptocurrency player sees how the space will fare this year.

Lee is often referred to as the first major Wall Street strategist to cover Bitcoin. In his latest report, he touches on everything from where he sees Bitcoin’s price by the end of 2018, to how altcoins have performed and will continue to perform in relation to Bitcoin.

We’ve combed through the report, and have highlighted some of its key findings here.

New recommendations

The first thing to note is that Fundstrat has expanded its recommendations for 2018, so that Bitcoin is not the sole focus. Now the firm is advocating that investors look at three additional tokens: Ethereum, Ethereum Classic, (ETC) which is essentially a hybrid of ETH/BTC, and NEO, which further expands flexibility on smart contracts.

2018 expectations

With that being said, let’s move on to the 2018 expectations.

There are a host of issues that crypto players should be on the lookout for in 2018. The report notes that among them are technical, institutional and regulatory hurdles that will likely remain as “clearly momentum has been established."

The report notes that asset tokenization has significant potential. There is also the likelihood of greater governance and focus on regulatory issues. Overall, “2018 should be a year of progress,” according to the report.

Among the cryptos to watch are Bitcoin and Ethereum, which are expected to rise 40% and 19%, respectively.

Here are the year-end price targets Lee has put in place for the list of cryptos that he thinks should be watched.

Bitcoin - $25,000

Ethereum - $1,900

Ethereum Classic - $60

Interesting about Lee’s Bitcoin’s price target is that last year, Lee had predicted Bitcoin’s price not reaching $25,000 until 2022.

Helping to drive the growth in 2018 are institutions. The report states:

Ultimately, we expect institutions to become more comfortable with valuation approaches to cryptos, as markets have shown willingness to accept evolution in market approaches. Consider that prior to 1995, 92% of tech IPOs were profitable. Today, it is 20%. Equally important, crypto-currency correlation to equity, bonds and commodities is low, arguing for portfolio allocations to crypto.

Buying opportunity

In the report, it is noted that despite the turbulent start to the year Bitcoin and other cryptocurrencies have had, the space is on track to having a relatively strong 2018. Bitcoin has fallen less than 40% from its near $20,000 high that it hit in December. When key factors are considered, such as past declines, Bitcoin’s bottom is $9,000.

“We think the best way to think about sell-offs is to look at it through the lens of retracements— how much of the prior rise is given back. The recent rally of 94 days saw a $16,536 increase in bitcoin’s price (+556%) and a 63% retracement implies that bitcoin’s price should retrace to around $9,000.”

On that same note, the report states:

“We view this $9,000 as the biggest buying opportunity in 2018—and we would be buyers at levels around here.”

This year, Fundstrat forecasts the cryptocurrency market cap to exceed $1.2 trillion. The growth will be fueled by tokens with the strongest use case.

“In our view, the strongest use case for crypto-currencies is financial corridors (transactions, transfers) and those tokens focused on this area should outperform—favor BTC, ETH, etc.”

Altcoins better than Bitcoin

An interesting find relates to altcoins. The report notes that 2017 was an “exceptionally good year” for them.

In 2015 and 2016, the peak of the altcoin rallies was 28% of tokens rising 200% in a rolling three month period, according to the report.

In mid-2017, this figure peaked at 81%. So far this year, the figure is hovering at 78%, and it is approaching the 2017 highs.

“Not surprisingly, when [altcoins] are selling off, this is bullish for bitcoin/ETH. When the [altcoin] surge peaks, we generally see a surge in Bitcoin… and likely Ethereum as well…”

What’s next?

Lee has been surprisingly accurate in his predictions about Bitcoin, so the points he laid out in the Jan. 18 report should not be taken with a grain of salt.

The report was released on the same day Bitcoin was finally pulling away from the $10,000 price it had dipped below earlier this week. The crypto even managed to tip above $12,000 before retreating. It was trading around $11,400 at the time of writing.

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